17 January 2016

Yves here. This post provides a solid overview of the Sanders Big Finance reforms, and as important, some of the ways it has been caricatured or flat-out misrepresented.

wanted to add a couple of points.

Disingenuous critics treat the less-than-well-thought out details of the Sanders plan as if it were cast in stone. For example, the idea of a usury ceiling is sound. Classical economists like Adam Smith called for them because they could see in their day that lending with no interest rate curbs led creditors to target borrowers who were desperate or reckless but still had some ability to pay, which then was wealthy gamblers, not productive enterprise. The defect of the Sanders proposal is it sets one rate that is fixed across all products. It should instead be set in relationship to prevailing interests rates and (at a minimum) vary with the maturity of the obligation.